HP to buy Palm for $1.2B

Hewlett Packard Co. Inc. said it reached an agreement to pay $1.2 billion for Palm Inc. to secure a stronger competitive position in the lucrative but increasingly tough smartphone market where Apple Inc. has gained a huge following at the expense of early starters, including HP, Motorola, Nokia, Palm and Sony-Ericsson.

The transaction would mark the end of Palm's long fight to remain relevant in a sector it once dominated and where it played a pioneering role. The company's flagging fortunes has in recent months resulted in speculations it might be acquired by a bigger rival, including possibly a competitor in Asia.

Palo Alto, Calif.-based HP said it would pay $5.70 per share for Palm, representing a 23 percent premium to the smartphone vendor's closing price on Tuesday (April 27.) The transaction would give HP access to Palm's operating system and give the consulting, computer and information technology company instant name recognition for its smartphone products, a sector where it has failed to gain traction compared with the performance of Apple's iPhone system.

HP would also be able to leverage its formidable market position in the high-tech sector and healthy balance sheet to strongly push and promote the Palm brand, according to executives at both companies.

"The combination of HP's global scale and financial strength with Palm's unparalleled webOS platform will enhance HP's ability to participate more aggressively in the fast-growing, highly profitable smartphone and connected mobile device markets," HP said in a statement. "Palm's unique webOS will allow HP to take advantage of features such as true multitasking and always up-to-date information sharing across applications."

Todd Bradley, executive VP, personal systems group at HP added: "The smartphone market is large, profitable and rapidly growing, and companies that can provide an integrated device and experience command a higher share. Advances in mobility are offering significant opportunities, and HP intends to be a leader in this market."

The companies said their respective board of directors had approved the transaction, adding that Jon Rubinstein, chairman and CEO of Palm, would remain with HP after the deal closes sometime during HP's fiscal third quarter ending July 31, 2010.

I'm an employee at a company that was acquired. I can tell you from experience that this doesn't necessarily mean that Palm's fight ends. In fact, acquisitions often turn out to be big steps up for the company being acquired.